In a trilogy of recent Federal Court trial decisions, three separate cases upheld the insurer’s “virus exclusion” barring coverage for losses “caused directly or indirectly by the presence, growth, proliferation, spread…of any virus.” While the Third Circuit has not reached a decision on these issues, Federal Trial Courts adjudicating summary judgment motions in favor of the insurers have determined that the “virus exclusion” precludes coverage for losses due to the government restrictions aimed at curbing the spread of Covid-19.
In Eye Care Center of New Jersey v. Twin City Fire Insurance Company, 2021 U.S. Dist. Lexis 24344 (decided February 8, 2021), Judge McNulty from the Newark vicinage determined as a matter of law that the “virus exclusion” precluded coverage for the Eye Care Center’s losses. The Eye Care Center claimed that it was unable to perform non-emergency surgeries and sought business interruption coverage from its insurer.
The Judge recognized that similar cases have proliferated around the country and that “nearly every court to address the issue has barred coverage based on similarly worded virus exclusions.”
Similar results were reached in the Camden Vicinage in New Jersey in two cases decided on March 10, 2021 and March 12, 2021. In Body Physics v. Nationwide Insurance Company, Civil No. 20-9231, and Colby Restaurant Group v. Utica National Insurance Group, Civil No. 20-5927, Judge Bumb addressed similar claims of the insureds, claiming business interruption losses due to government restrictions imposed to curb the spread of Covid-19. Assuming for the purposes of the opinion that the plaintiffs are entitled to business income, civil authority, and extra expenses related to the Covid-19 restrictions, the Court found it was “undisputed that Covid-19 is a virus.” The Court found that the Covid-19 fell squarely within the “virus exclusion” and barred coverage under New Jersey, Florida and Washington law. The Court also cited a litany of other cases from around the country, determining that the “virus exclusion” language is unambiguous.
A recent Camden County State Court also determined the virus exclusion was clear, unambiguous, and rejected application of the reasonable expectation doctrine to find coverage. In Mac Property Group, LLC v. Selective Fire and Casualty Insurance Company, Docket No. L-2629-20, the trial judge determined that the reason for the exercise of the civil authority causing business interruption was Covid-19 which justified application of the exclusion.
Implication for Insurers and Policyholders
While there are a handful of cases around the country determining that Covid-19 related business interruption claims might be covered under the first party policies, the vast majority of the cases around the country, and multiple cases in New Jersey, have upheld the “virus exclusion” to bar first party business interruption claims. While the exact language of each policy exclusion must be analyzed on its own, the recent decisions in New Jersey deciding Covid-19 coverage cases are decidedly pro insurer.